Imagine: Your clients, the claimants (C), a young couple, were granted a long lease by the freeholder (“D”) in 2002.
Following a fire which causes considerable losses, and for which C is not properly reimbursed, C issues a claim against D for breach of covenant for failing to insure the building. D does nothing. C gets judgment in default. D makes an application to set aside judgment in default, claiming he had been unwell. The application is dismissed. D makes a second application to set aside default judgment, again claiming ill health. D is granted an extension of time to put in a fully particularised draft defence. No draft defence ever appears and D’s second application to set aside the default judgment is dismissed.
C decides that bankruptcy is the best way to get its money. C serves a stat demand. D makes an application to set aside the stat demand. D now argues he is the wrong defendant as he had transferred his interest to his company at the time of the alleged breach. Yet again, D’s application is dismissed. D does not appeal this dismissal.
At the bankruptcy hearing, the district judge rejects well established case law that it is not appropriate to go behind a judgment on which the debt is based, finds that the correct defendant ought to have been D’s company on the basis of the land registry, dismisses the petition and sets aside the original judgment.
On appeal, however, Mann J set aside the order in its entirety. As the original landlord, D remained liable for the covenants under the lease as he had not applied for a release under section 6 of the Landlord and Tenant Covenants Act 1995. The premise on which the district judge had set aside the judgment was wrong. He did not even need to consider whether or not it was appropriate to go behind the judgment on which a debt is based, but was sceptical whether the judge was right and set out that she should not have set aside the judgment without more formal steps.
The lesson to be learnt is: never put the champagne on ice before (or after) a trip to the county court…
Philippa Seal represented the Claimants in Reeves v Sandhu LTL 13/1/2015.
Philippa Seal / 7th Feb 2015
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